Quantum sidesteps NYSE delisting with reverse stock-split move
Eight-for-oner provides lots of share price headroom above NYSE minimum price
Data protection and multi-tier file management supplier Quantum is escaping a delisting threat from the New York Stock Exchange with a 1:8 reverse stock split.
The company’s shares had not traded at the minimum required average closing price of $1.00 for 30 consecutive trading days when NYSE issued the delisting threat letter in October last year. With the reverse split, eight current Quantum shares will become one new share on April 18. The shares are now trading at $0.87 and, with the reverse split, would be worth $6.96, giving Quantum lots of headroom above the $1.00 minimum price.
The reverse split will reduce the number of shares of the company's outstanding common stock from about 273 million to around 34 million shares.
The company is fighting, or working with, as its board would say, activist shareholder VIEX. The board is being restructured with new independent directors as VIEX pushes for changes in Quantum's business strategy to deliver increased shareholder value.
As is the way with these things, the possibilities on the table that we can see include cost-cutting through product line closures, product line and/or business unit sales to an outright company sale. The background to this is that Quantum was a tape product-based data protection form with its own proprietary tape format.
As that market declined, it moved into its DXi deduplicating disk arrays and StorNext multi-tier file management and workflow. The revenues from these product lines have not grown fast enough, in general, to offset declining tape product sales. Quantum’s exec management has worked to manage the tape product decline while building up the new product technology revenues and the company’s revenues are now growing again, but there is a long way to go.
The VIEX people think Quantum’s management should have done a better and faster job and that, if it had, the share price would be much higher than it is and the reverse stock split manoeuvre avoided. It’s always easier to point out problems than fix them. ®